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Sometimes, even the best earnings reports can get lost in broader market noise.
Such was the case with chipmaker Intel Corporation (NASDAQ:INTC) on Friday, April 27. The company reported a really strong double-beat-and-raise quarter on Thursday afternoon that showed strength in all the right places.
INTC stock jumped 8% higher in after hours trading as a result. The stock carried that momentum into the open on Friday.
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But Intel stock proceeded to give back all of those gains and actually fell into the red on Friday. By the close, INTC stock was down 0.6%.
Why? Broader market noise. The whole market opened up way higher thanks to strong reports from Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT) and Intel. But, then, that post-earnings euphoria cooled off.
There’s nothing wrong with that. The markets had a big move higher on Thursday, powered mainly by strong earnings from Facebook Inc (NASDAQ:FB). Thus, a little profit-taking into the weekend was only natural.
But when it comes to INTC stock, this broader market noise should be largely ignored. All it’s doing is drowning out rightly-placed optimism from a fantastic earnings report, dragging down the stock price, and creating a more compelling buying opportunity for long-term-oriented investors.
Here’s a deeper look:
Intel’s Quarter Was That Good
Combing through the numbers, it’s easy to that Intel’s quarter really was that good.
The PC-to-data-centric transition is playing out perfectly. PC-centric revenue was up an anemic 3%, as expected. After all, the PC market is largely saturated.
But that anemic growth is pretty much meaningless at this stage in the game. Data-centric revenues soared 25% higher, led by robust growth in all the company’s key growth markets (namely, data center and the Internet-of-Things). Better yet, the big growth data-centric business now comprises half of total revenues.
As such, the total company’s growth profile is starting resemble data-like growth. Total revenues rose 13% in the quarter.
The return of strong revenue growth has been accompanied by a return in operating leverage in the business model. That strong leverage (total spending rate fell from 36.6% to 32.4%) and a lower tax rate drove 32% earnings growth in the quarter.
Those are big numbers for INTC. And they aren’t going away any time soon.
Next quarter, revenues are expected to grow by 10%, while earnings are expected to grow by more than 30% again. This continued strength in the company’s financials speaks volumes about the company’s improving secular growth prospects.